According to the Proviso of sub-rule (1) of Rule 6 of the Service Tax Rules, 1994 reads, “Provided also that the service tax on the value of taxable services received during the month of March, or the quarter ending in March, as the case may be, shall be paid to the credit of the Central Government by the 31st day of March of the calendar year.” Even otherwise, interest @18% per annum is chargeable under Section 75 of the Finance Act, 1994, for delayed payment of service tax. There are cases where industries pays excess service tax to the credit of Central Government due to miscalculation of service of value, pending of the information regarding the actual receipt of the values of the taxable services provided or paid service tax to the credit of Central Govt. on services which was later not provided for any reason which later appears that excess service tax has been paid. How we can adjust the excess payment of service tax against the future liability or Is there any period or monetary restriction for such adjustments?

As Illustrated: Whether the excess payment of service tax of Rs. 10 lakhs during the month of March, can be adjusted straightaway throughout the tax liability due for April, or it can be adjusted in the coming months if any balance left?

In the contrast this with sub-rule (3) of rule 6 of the Service Tax Rules, 1994, which reads,

“(3)Where an assessee has paid to the credit of Central Government service tax in respect of a taxable service, which is not so provided by him either wholly or partially for any reason, the assessee may adjust the excess service tax so paid by him (calculated on a pro rata basis) against his service tax liability for the subsequent period, if the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received.”

In the above scenario, where an assessee paid service tax in advance, who later on did not provide any service, hence there was no liability on his part to pay the service tax in the first instance, as per the above sub-rule, in case he refunded the service tax to the person from whom he received, can adjust the amount without any restriction on the amount or the period. Notice the words, ‘for the subsequent period’ in the above sub-rule (3) against the words, ‘for the succeeding month or quarter’ of sub-rule (4A)
Sub-rule (1A) of rule 6 of the Service Tax Rules, 1994, which reads as follows.

“(1A) Without prejudice to the provisions contained in sub-rule (1), every person liable to pay service tax, may, on his own volition, pay an amount as service tax in advance, to the credit of the Central Government and adjust the amount so paid against the service tax which he is liable to pay for the subsequent period:

Provided that the assessee shall: intimate the details of the amount of service tax paid in advance, to the jurisdictional Superintendent of Central Excise within a period of fifteen days from the date of such payment; and indicate the details of the advance payment made, and its adjustment, if any in the subsequent return to be filed under section 70 of the Act;

Explanation: For the removal of doubt, it is hereby clarified that in case the value of the taxable service is received before providing the said service, service tax shall be paid on the value of service attributable to the relevant month, or quarter, as the case may be.”

In the above case, an assessee can pay service tax in advance and adjust the same as and when he receives the taxable value on pro rata basis during the subsequent period. There is no restriction as to the amount and the period of adjustment, as in the case of non–provision of service mentioned in sub-rule (3) of rule 6. Notice the words, ‘for the subsequent period’ in the above sub-rule (1A), against the words, ‘for the succeeding month or quarter’ of sub-rule (4A).
Sub-rules (4A) and (4B) of rule 6 of the Service Tax Rules, 1994 which are relevant, read as follows.

“(4A) Notwithstanding anything contained in sub-rule (4), where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter, as the case may be.

(4B)Reason for adjustment: Adjustment shall be possible if excess payment of service tax for a month/quarter (as the case may be) shall be for any reason other than following:

(i) wrong interpretation of law;

(ii) Taxability, classification or valuation of taxable services;

(iii) Applicability of any exemption Notification

(ii) Monetary limit: Excess payment made for a month/quarter (as the case may be) can be adjusted within a monetary limit of Rs. 2 lakh. However, Adjustment of excess payment made, in case of Centralized Registration, due to delay in receipt of details from other offices (branches), can be done without any monetary limit.

Amendment: W.e.f.01.04.2012, rule 6(4B) has been amended vide notification no. 3/2012 dated 17.03.2012 to remove conditions mentioned in column (ii) & (iii) hereinabove. Now, adjustment of excess payment of service tax made can be adjusted without any monetary limit. Further no intimation is required to be filed with Superintendent. However, adjustment of excess payment made shall be reflected in service tax return of the assessee.

Sub-rule (4) of rule 6 reads as follows.

“(4)Where an assessee is, for any reason, unable to correctly estimate, on the date of deposit, the actual amount payable for any particular month or quarter, as the case may be, he may make a request in writing to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, giving reasons for payment of service tax on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, on receipt of such request, may allow payment of service tax on provisional basis on such value of taxable service as may be specified by him and the provisions of the Central Excise (No.2) Rules, 2001, relating to provisional assessment, except so far as they relate to execution of bond, shall, so far as may be, apply to such assessment.”

So, in the cases of advance payment, centralized accounting system and non-provision of taxable service, there is no restriction as to the amount and period, as to the adjustment of excess payment of service tax. In the case of excess payment (rule 4A & 4B) simpliciter alone, such adjustment can be made only once during the subsequent month or quarter, as the case may be, without any monetary limit.

Forexample: An assessee paid an excess service tax of rupees 5 lakh in the month of March, and his liability to pay service tax for the month of April is 2 lakh rupess, so 2 lakh rupees can be adjusted out of excess payment of 5 lakh made in march, but the balance of 3 lakh rupees cannot be adjusted due to period restriction and therefore the assessee has to claim refund for the balance amount of 3 lakh rupees.

The reasons for the stipulation of period restrictions imposed on adjustment of excess payment of service tax (sub-rule 4) appears improper, although the alternate path of filing of refund claim is available, which is a bit cumbersome procedure when compared with the self-adjustment of excess payment of Service Tax by the assessee.

Initially there was a restriction on Monetary limits also but by virtue of the notification no. 03/2012 dated 7/03/2012 the Monetary limits has been abolished by the finance act but Time limits for adjustment of excess service tax payment is still a issue before us.

Hence it is advisable and equitable that the Govt should also lift the period restriction of sub rule 4A of rule 6 of Service tax rules 1994.

29 responses to “How to adjust excess service tax payment”

Dear Sir,
I have paid excess Service tax on Dec, 2016 due to calculation error which comes out to be Rs. 24,000/- in excess. After that, I had not paid any service tax to the government. Sir, how can I claim the refund of such excess payment? Please reply asap

Sir, We are Pvt. Ltd. Company & service tax provider on Renting of Immovable Properties. We are raising our bills on monthly/Quarterly basis to our clients/ service receipents. But for the last 5 – 6 years they have not paid our service tax regulary, they have paid in instalments. Now they says that we should raise the bills in current date with current rate (form 10% & 12.36% & 14 % previous rates of service tax to current rate i.e. 15%) to claim our pending service tax from them. Is it possible? What will be effect on our liabilities. will there be any penalty from the department regarding issue of duplicate bills in current date with current rates?

Sir, If Service provided in the month of April ’16 are of Rs. 1,00,000. Invoice raised by Service Provider is Rs. 1,00,000 + Service Tax thereon Rs. 14500 i.e. Rs. 1,14,500. Payment made to Service Provider is Rs. 1,14,500. However, on review by Service Receiver it was observed that actual service provided were of only Rs. 80,000 and Service Receiver has made an extra payment of Rs. 20,000 + Service Tax thereon Rs. 2,900. Please tell me, how can this be settled in the next month’s billing, if Service Provided in the month of May ’16 are of Rs. 1,20,000.

Sir, In Q1 we have booked one Licensee invoice for full year on 01/04/2015 and due to late possession they have decided to pay rent for only six month which was finalized after paying service tax of Q1 therefore we have issued Credit note for six month and we have paid excess service tax of Rs.4 lakh, which we have adjusted in Q2 payment of SErvice Tax
My query is how to show same in ST-3 return

We are a ltd company and while updating service tax menu for GTA bill which was already paid by the transporter ,updated once again and as per its report we have calculated and paid service tax once more . The same was identified on scrutiny of bills on audit. Can these payments made excess be adjusted from next year service tax payments.

I have paid a service tax interest under the head 00440061 has been paid twice by mistake, Sir can you help me how the same can be refunded or can be adjusted in the latter payments…. I am worried as the amount has been paid under the Interest head.

Dear sir,
I have paid excess service tax on March’2014 and return also filed on 27-Nov-2014. In May i came to know that i have double accounted the sales so the service tax also paid more.
Kindly let me know how can i adjust the double entry of sales, and can service tax be adjusted to Apr’15 service tax payment. please give me the answer

We are providing courier agency services and collect the amount from customer. But on the contrary we are paid half amount to the company including service tax and also we are calculate service tax on invoice basis. So how can we take credit of this also we are paid service tax on telephone and internate bills to the bsnl. Please suggest me how we are calculate service tax. Thank you very much.

we are doing trading cum Govt. & private order supply business of computer maintance and softare development. we are register under the sevice tax and local sales tax but not register under the central excise. we have purchase one software from ABC company and ABC company collected Excise duty of 10.30% from us. The same we have sold to XYZ campany and collected service tax @12.36%. Can service tax collected from XYZ company adjusted against the central excise paid to ACB company?

sir,
excees paid of service tax in March 2014 and this amount carry forward in March 2014 Return. now April to Sep 2014 return is not any liability of tax than how to March 2014 return Credit Carry forward to next return for(Oct To March 2015)……
Please suggest, what I can do

Sir, We have paid sercise tax on the basis of INVOICE raise by us. But while receiving the payment ,understood that the service receiver has deducted 50% service tax amount & has paid to the department.We r looking for the refund of 50% which we have paid as per invoice . kindly advise

Sir we have paid excess service tax on rent, income from residence rent in month of oct13 can we adj. the same in payment of service tax payable on security bill payment& rent income from office premises in month Dec. 13

We have paid the Service Tax on the basis of Invoice reaised by us on due date. Bill for May paid in June 5th. But our customer deducted the some amount from our bill alongwith Service tax proportionately. Now how to adjust the Excess Service Tax amount paid by us as we have paid the service tax before receiving the payment.

Sir,
Our firm has paid service tax of Rs.3,65,815/- for the first two quarters that is Apr-Jun 2012 and Jul-Sep 2012. But on further calcualtion of Service Tax turnover it is found that the actual Service tax payable for the F.Y.2012-13 is only Rs.3,50,212/-. That is we paid excess of Rs.15,603/-. Still the half yearly returns for the period Sep 2012-Mar 2013 were not filed. Please suggest the remedy for adjusting the tax for whole year and carry forward of the excess service tax paid…..

Sir,
We are working in Semi- Govt. institution was Wrongly deducted Service Tax as per RCM Clause of Rs – 400000/- because Service tax act newly introduced to Service Receipant.
Pl. guide us whether these amount adjusted or refunded from Service Tax authority or otherwise.

Dear Sir,
I faced the problem toward treatment of Advance Service Tax paid, in Excel Utility provided by the department. For example Service Tax payable for the month of March 2013 is Rs. 90,000/- but wrongly paid Rs. 1,00,000/- on lum Sum basis. Now the problem is if I create the ST liability with Rs. 90K, and update Rs. 10K in advance column, here the utility required / mandate challan detail, actually challan value is Rs. 1 Lac, how much need to update here, 1) if put challan value is Rs. 10K in Advance -Payment and put challan value is Rs. 1 Lac in Detail of Challan, validation shown the mismatch in challan and 2) if put challan value is Rs. 1 Lac Advance -Payment and put challan value is Rs. 1 Lac in Detail of Challan, now the validation shown Ok, but it is technical wrong.
Please suggest, what I can do………..

I understand that there is a time limit for adjustment of excess service tax paid against service tax liability, but does this time limit also apply in case the excess ST paid is to be adjusted against excise duty liability?

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